Shares of digital marketing company MaxPoint Interactive fell 56 percent Friday in the wake of the company’s disappointing projections for fourth-quarter revenue.
Investors were ignoring the better-than-expected third-quarter results that included a 42 percent hike in adjusted revenue and were instead focusing on the company’s reduced guidance.
In addition, Needham & Co. analyst Kerry Rice downgraded his rating on the stock from a “buy” to a “hold” before trading commenced Friday. MaxPoint issued its third-quarter results and new guidance Thursday after the markets closed.
Shares of Morrisville-based MaxPoint closed Friday at a new low of $2.20, down $2.77. The company went public at $11.50 per share in March but its shares have failed to gain traction with investors since the IPO.
During a conference call Thursday, MaxPoint executives fielded questions from analysts who wondered if the company’s customers were switching to digital marketing competitors or were disappointed with the results they were seeing. MaxPoint’s software enables manufacturers and retailers to use targeted online advertising to generate sales in brick-and-mortar stores.
MaxPoint executives insisted that customers were merely, as Chief Financial Officer Brad Schomber put it, reducing their promotional spending “for budgetary and other internal reasons.”
“Our primary competition continues to be traditional media, print, etc.,” CEO Joe Epperson said. “We have not observed a rise in our customers picking other digital solutions.”
“We are very confident in the solution we have,” Schomber said. “Our customers are still spending with us. We don’t see any increased rate of customers dropping off the system.”
Rice, the analyst, wrote in a research note: “While we do not believe MaxPoint is losing customers or that customers are shifting their spending to competitors, the inability to pinpoint the root cause of the reduced spending (forecast for the fourth quarter) highlights the limited visibility into 4Q15 and 2016.”
MaxPoint projected that adjusted revenue in the fourth quarter would range between $20 million and $24 million, well below the $29.8 million analysts have been forecasting.
The company also reduced its guidance for revenue for the full year to between $81.1 million and $85.1 million, versus its prior guidance of $86.7 million to $93.2 million.
That reduction came despite a 55 percent increase in “enterprise customers” – customers that spend more than $10,000 a year – over the past year. MaxPoint now has 670 enterprise customers.
Deutsche Bank analyst Ross Sander noted during the conference call that the company’s guidance of $20 million to $24 million in adjusted revenue in the fourth quarter marked “zero growth” compared to third-quarter revenue of $23 million.
“I think coming into this year we would have been shocked to be exiting at zero percent growth,” Sandler said.
The company also reduced its projections for adjusted EBITDA, or earnings before interest, tax, depreciation and amortization.